NOBODY KNOWS FOR SURE

"How long's this going to take,' the student queried the master?

"However long it takes," the master replied. 

And that's the correct answer here. Nobody knows for sure.

As we pointed out before, there's something largely amiss when Spanish 10-year bonds yield less than their U.S. equivalents. And that's just for starters. It's become a wide spread phenomena in the global bond market that literally no one anticipated. Well, there may have been a few like those who always enjoy talking about their fishing ventures.

The Bard may have noted that "All's well that ends well," but the chances of this turning out good when the day of reckoning arrives are slimmer than the waistline on a runway model at a New York fashion show.

As the believers and the apostates line up to debate the convergence issue, investors have to decide whom to believe. And caught right smack dab in the middle is, you guessed it, central bankers. In this case the Mario Man. With his we-got-this-covered assurance he's essentially put a put option, ala Mr. Greenspan, under some raggedy debt instruments that is now spreading to the corporate bond market as well.

One can only fathom the number of books with catchy titles that will in a few years hit bookstore shelves: "When is Junk Junk?" "Why Nobody Told Us"  "Where Oh Where Did Mario Go?"
"We Got This Covered!"

Also caught in the middle is the euro, a currency Mario Man and his fellow central bank buccaneers are hoping to depreciate as they swash-buckle their way to some much hoped for inflation.

Much of this on-going saga was recounted today in the Financial Times article, "Eurozone bond rally nears high water mark." To be completely accurate that headline should've had a question mark at the end as the debate rages on.

Nobody knows how long it takes. But if you have any spare crash helmets lying around, now might be a good time to start dusting them off.